Financial Analysis for Padini Company

Part 3 :Financial Analysis for Company –Ratio Analysis
Current year 2013 Previous year 2012
Liquidity Ratio
1.Acid Test Ratio
= Current Assets – Inventories
Current Liabilities
Acid Test Ratio
= 412439 - 143838
116618
= 2.30 : 1 Acid Test Ratio
= 380266 – 192285
120541
= 1.56 : 1Acid Test Ratio measure the firm’s ability to repay current liabilities after the least liquid of the current assets (inventory) is deducted. The higher the ratio, the more financially secure a company in the short term. PADINI faced an increase on current assets and less inventory compared with previous year (2012) ,but in 2013, PADINI able to increase the ratio from 1.56 to 2.30 ,which is more financially secure and able to meet their current liabilities which mostly consists of trade and other payables . 2. Current Ratio

= Current Assets
Current Liabilities Current Ratio
= 412439
116618
= 3.54 : 1 Current Ratio
= 380266
120541
= 3.15 : 1Current Ratio measures the ability of the firm to meet its short – term financial obligations. Ratio that greater than 1 is able to meet their current liabilities. The higher the current ratio, the more capable the company is to pay its liabilities. PADINI an increase much in current ratio compared to previous year 2012 which is from 3.15 to 3.54 because there reduction in short-term liabilities and faced great situation to company. Debt Management Ratio 3. Debt-to-equity Ratio

= Total Debt
Common Equity
Debt-to-equity Ratio
= 140119
372226
= 0.38
= 38% Debt-to-equity Ratio
= 145986
339413
= 0.43
= 43%Debt-to-equity ratio the relationship between proportion of debt and shareholders’ equity and use. It to finance a company’s assets. PADINI faced decrease in ratio, from 43% to 38%. The decreasing of ratio gives more confidence to creditors which believe that they (creditors) have a protection to their money and it leads to financially stable...

...Jacob’s Pharmacy in Atlanta, Georgia on May 8, 1886 for 5 cents a glass with its first advertisement in the Atlanta Journal on May 29, 1886. It wasn’t until 1955 when cans of Coke started to make its first appearance (Official Coca-Cola website).
By the 21st century, Coca-Cola is proclaimed to be the world’s largest beverage company sold in more than 200 countries. The company owns and markets four out of the world’s top five beverage brands; Coca-Cola, Diet Coke, Fanta, and Sprite. Coca-Cola’s current business situation is obviously more expansive than the early years, with increased sales, maximized profit, and product expansion into new markets. According to Chief Executive Officer, Muhtar Kent, Coca-Cola’s net income rose six (6) percent to $2.45 billion, or 54 cents a share, from $2.31 billion, or 50 cents a share from a year earlier ( NY Times, 2013). Based on Coca-Cola’s quarterly profit, the company is right on track with their goal in doubling its 2010 revenue. The sales volume of noncarbonated drinks like juices, tea’s, fuze, and bottled water has had double digit percentage growth in comparison to Coke’s actual soda beverage.
A SWOT analysis was conducted for Coca-Cola in 2013, the results were as follows; Strengths: (1) The best global brand in the world in terms of value ($77,839 billion), (2) Coca-Cola holds the largest beverage market share in the world (40%), (3) Coca-Cola’s advertising...

...Review of SSP’s financial performance and position
Profitability
Overall SSP plc has increased turnover by nearly 15%, however, this appears to be at the expense of operating profit which has fallen by 20%.
The company’s Return On Capital Employed (ROCE), which indicates how well the business has used the financial resources which have been invested in it, has fallen from 31.9% to 23.3%. Although the ROCE for 2004 in absolute terms appears quite satisfactory (it is certainly higher than the cost of capital), this ratio shows a decline from the previous years and must be further investigated.
The gross profit margin (which effectively compares the cost of goods sold with the selling price) has been maintained at 60%. However, the net profit ratio (which measures operating profit as a proportion of sales) has fallen from 12.1% to 8.5%. This indicates that the fall in profitability is due to a disproportionate rise in expenses in relation to turnover. In particular, administrative expenses have increased by 26% which is more than the increase in sales. This overall drop in the profit margin will be a major factor in the drop in the ROCE and further analysis must be undertaken to ascertain what specific expenses were responsible.
Liquidity
All firms need liquid assets to meet day to day payments. Cash is the life-blood of any business, no matter how large or small. If a business has no cash and no way of...

... 2013
To:
Chief Executive Officer
From:
RE:
COMPANY G – FINANCIALANALYSIS YEAR-12
CURRENT RATIO
The Current Ratio is used to identify whether or not a company can pay its current obligations.
This ratio takes into consideration the current assets and current liabilities from the balance sheet
and measure the company’s ability to pay their short-term liabilities. In most cases higher the
ratio the more able the company is to paying their current obligations and is much more desirable.
The Current Ratio calculation is as follows: Current Ratio equals Current Assets divided Current
Liabilities. Company G has a Current Ratio for YR12 of 1.77. Comparing YR12 to YR11 the
company’s Current Ratio declined a bit from 1.86 last year. The industry quartile data of 3.1, 2.1
and 1.4 shows that the resulting 1.77 is between the median and 1st quartile. This ratio shows a
weakness in Company G current ratio matrix.
ACID-TEST RATIO
The Acid-test Ratio or Quick Ratio is similar to the Current Ratio but is much more strict by
removing inventory from the current assets in the formula. It measures if a company has enough
short-term assets to cover current liabilities excluding inventory. With the acid-test, assets include
Cash, Accounts Receivable and Short-term investments and is compared to Current Liabilities. A
higher Acid-Test Ratio is desired...

...days 52 days 37 days
Cash Conversion Cycle 32 days 27 days 133 days
Cash flow from operating activities 65,264 39,330
Current Ratio Trend: In both years, the company has the ability to use its resources to pay for its short term debt. However, the current ratio has decreased from 2009 to 2010. This means the company is becoming weaker.
Quick Ratio Trend: The quick ratio has decreased from 2009 to 2010. This means the company is becoming weaker and has less current assets (excluding inventory) in relation to its current liabilities. Therefore, its ability to pay short term creditors has not improved.
*Quick Ratio compared to current ratio: The company's current ratio is significantly higher compared to its quick ratio. It is a clear indication that the company's current assets are dependent on inventory.
Average Collection Period: Spartech Corporation average collection period ratio has decreased from 2009 to 2010. However, if the company "grants" its customers 60 days to pay purchases placed on credit, then both ratios of 51 days and 48 days are acceptable. If, on the other hand, the company allows its customers only 30 days to pay for purchases placed on credit, then the management of Spartech Corporation should attempt to reduce the average collection period ratio by screening...